Mortgages Can Be Created by One of the Following Methods
In order to streamline the procedure and create a public domain for unregistered equitable mortgage (UREM) properties under loan to any bank/FI, thereby enabling the consumer to view the ‘charge’ on any property under loan, the Government of India has established the Central Registry of Securitisation Asset Reconstruction and Security Interest of India, under the SARFAESI Act. This Act pertains to attachment/auction of UREM properties under bank/FI loan of one lakh rupees and above; further, these are in ‘non-performing asset’ category and the mortgage in such cases has been created in favour of the lending institution.
Before understanding CERSAI, it will be useful to understand the various types of mortgages, as CERSAI registers only equitable mortgages.
Why Create Equitable Mortgage with Banks?
institution in consideration of loan (value) obtained (received). a hold on the property documents till the loan/ advance is repaid in full. So this loan account can never go bad. against property, while retaining his primary rights over the property. He or she is only asked to submit/deposit original title deeds of the property with an intention to create an equitable mortgage. The loan is processed faster than other loans. a) Simple registered mortgage (SRM)
There is no sale of the property to the lender; the possession remains with the owner but on nonpayment of the loan, the property can be sold. b) English mortgage
The entire property is transferred in the name of the lender, and on repayment it is transferred back to the original owner of the property. c) Usufructuary mortgage
This allows transfer and possession of the property in favour of the lender, but the original title deeds remain with the owner. d) Mortgage by conditional sale
Failure to pay the loan will entail the sale of the property. e) Unregistered equitable mortgage (UREM)
This is mortgage by deposit of title deeds. Here, you will need to hand over to the lending bank the property documents in its original form for the bank to process your loan application and subsequent sanction for the captioned purposes. What the bank does is to keep the original property documents in its safe custody as main/collateral (supplementary) security for the loan sanctioned. The bank keeps the property documents till you clear the loan against it. It means that you create an intention in favour of the lending bank for deposit of original title deeds of the property for value received (consideration of a loan). There is no payment of stamp duty for this act of yours. The title deeds are only kept deposited with the bank in good faith, without creating any charge or registration. This is what is called creating an unregistered equitable mortgage (UREM). This is a perfect and legal method of creating a ‘charge’ against the property mortgaged in favour of the lending institution.
This is the most common and popular method of mortgage creation by consumers in favour of banks; here the most important element is creation of an intention or interest on the property mortgaged. As already mentioned, this is the cheapest way